Oracle Corporation et al v. SAP AG et al

Filing 401

Declaration of Stephen K. Clarke in Support of 399 Reply Memorandum In Support of Motion for Sanctions Pursuant to Fed. R. Civ. P. 37(c) and 16(f) filed bySAP AG, SAP America Inc, Tomorrownow Inc. (Related document(s) 399 ) (McDonell, Jason) (Filed on 8/4/2009)

Oracle Corporation et al v. SAP AG et al

Doc. 401

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Robert A. Mittelstaedt (SBN 060359) Jason McDonell (SBN 115084) Elaine Wallace (SBN 197882) JONES DAY 555 California Street, 26th Floor San Francisco, CA 94104 Telephone: [phone] Facsimile: [phone] [e-mail]; [e-mail]; [e-mail] Tharan Gregory Lanier (SBN 138784) Jane L. Froyd (SBN 220776) JONES DAY 1755 Embarcadero Road Palo Alto, CA 94303 Telephone: [phone] Facsimile: [phone] [e-mail]; [e-mail] Scott W. Cowan (Admitted Pro Hac Vice) Joshua L. Fuchs (Admitted Pro Hac Vice) JONES DAY 717 Texas, Suite 3300 Houston, TX 77002 Telephone: [phone] Facsimile: [phone] [e-mail]; [e-mail] Attorneys for Defendants SAP AG, SAP AMERICA, INC., and TOMORROWNOW, INC. UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA SAN FRANCISCO DIVISION ORACLE USA, INC., et al., Plaintiffs, v. SAP AG, et al., Defendants. Case No. 07-CV-1658 PJH (EDL) REPLY DECLARATION OF STEPHEN K. CLARKE IN SUPPORT OF DEFENDANTS' MOTION FOR SANCTION PURSUANT TO FED. R. CIV. P. 37(c) AND 16(f) REDACTED Date: August 18, 2009 Time: 2:00 pm Courtroom: E, 15th Floor Judge: Hon. Elizabeth D. Laporte
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I, Stephen K. Clarke, declare as follows: 1. 2. I have personal knowledge of the matters discussed herein. I have read the Declaration of Paul K. Meyer in Support of Oracle's Opposition to

Defendants' Motion for Sanctions Pursuant to Fed. R. Civ. P. 37(c) and 16(f) (the "Meyer Declaration"). I have also read the Declaration of Holly A. House in Support of Plaintiffs' Opposition to Defendants' Motion for Discovery Sanctions Pursuant to Fed. R. Civ. P. 37(c) and 16(f) (the "House Declaration") and Oracle's Opposition to Defendants' Motion for Sanctions Pursuant to Fed. R. Civ. P. 37(c) and 16(f) (the "Opposition"). A. Information Requests - Meyer Declaration Paragraphs 8 (a), 9, and 10. 3. In my prior declaration I described a variety of documents I will need to quantify

damages for each of the claims made by plaintiffs in this case. Mr. Meyer states in paragraph 8(a) that: "Detailed general ledger and subsidiary ledger information ... would be duplicative of, and would not provide significant additional value to, Oracle financial information that has been or will be produced by Oracle." However, to date, Oracle has yet to produce any company level financial statements for the Plaintiff entities. This issue is addressed in more detail in my Declaration in Support of Defendants' Motion to Compel Production of Financial Information of Plaintiffs. I cannot speak to financial information that "will be produced by Oracle" since I do not yet have it. 4. Mr. Meyer references lost profits related not only to lost customers but also to lost

potential customers. He goes on to state that I will be able to quantify alleged damages related to lost potential customers "...using financial data that is more useable and less cumbersome to produce..." than the general ledgers I have previously requested, and further, that such more useable data are "available." If the financial information is available to Mr. Meyer, it is not available to me because, to date, I am not aware that Oracle has produced any Plaintiff corporate level financial statement. B. Information Requests - Meyer Declaration Paragraph 8 (b), 11, and 12. 5. Mr. Meyer states that he "...may quantify damages related to support pricing

discounts that Oracle provided as a result of Defendants' alleged bad acts." (Emphasis added). I
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am unable to predict whether Mr. Meyer will quantify discount related damages. However, I am familiar with some of the documents he describes from OSSINFO. There are several problems with the information Mr. Meyer appears to have seen and be relying upon. The first is that he claims I can search the OSSINFO database. However, Oracle has not produced the OSSINFO database so I cannot search it as he apparently can. The second problem lies in the fact that although OSSINFO may approve a discount, there may be insufficient information in the OSSINFO database to determine the reason for the discount. 6. Oracle has not produced detailed customer information except for those customers

that became TomorrowNow customers. Therefore, it is impossible to determine whether Oracle was giving discounts to other customers at the same time and for essentially the same reasons, which might include some combination of: customers who were not using support services very much; customers who felt they were paying too much for the services provided; customers who were on old, stable platforms; customers who were capable of handling support internally; customers who needed to adjust their licenses because the metrics upon which support pricing had been set had changed; and so on. 7. In paragraph 11, Mr. Meyer reiterates the list of documents I said I would need to

assess Oracle's claim of damages related to pricing discounts. I stand by that list, and also point out that Mr. Meyer cannot properly quantify the pricing discount damages, if any, that Oracle suffered without reviewing such documents. 8. In addition, it was only when Oracle produced CD 194 that for the first time it

specifically identified any customers as "discount customers." Accordingly, I have not analyzed any information Oracle previously produced for information on discount customers because I had no idea who the alleged discount customers were. Even now, I am only aware of the identities of the 36 or so that Oracle has recently identified although I am aware that Oracle claims there may be up to 100 discount customers. 9. To properly analyze a particular customer's history is a time-consuming process

and it will take me about the same amount of work to analyze alleged lost profits damages for each discount customer as it does for each allegedly lost customer.
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Information Requests - Meyer Declaration Paragraph 8 (c), 13, and 14. 10. In paragraph 8(c), Mr. Meyer states that I am seeking discovery related to damages

he has "... neither quantified, nor anticipate quantifying." It is unclear from Mr. Meyer's declaration which of the damage claims will be the subject of quantification by Mr. Meyer. Unless a damages claim is clearly excluded, I have to be ready to address all the stated damages claims. 11. Mr. Meyer's concept of "non-quantified damages" is both novel and undefined.

Whatever it means, if Plaintiffs' lawyers or experts are going to refer to damages that are not part of their damages expert's analysis I need to be prepared to address such claims. Therefore, I need to have the necessary information to comment upon the economics underlying such claims. 12. In my previous declaration, I stated that in order to "...respond to Plaintiffs'

claims, Plaintiffs will have to provide the pertinent documents long before I learn Plaintiffs' specific damages methodologies (which will presumably be when I receive Plaintiffs' damages expert report)." Mr. Meyer has now confirmed that the first I time I will see the documents supporting at least one element of his damage computation, will be when they are produced as part of his expert damage report. Page 6, footnote 12 reads: "In connection with NCI's analysis of lost cross-sell and up-sell opportunities, we are directing Oracle personnel to gather information. We will provide that analysis and the supporting information in connection with my expert report, as disclosed by Oracle." D. Public Domain Documents - Meyer Declaration Paragraph 8 (d). 13. I am aware of the documents pertinent to the claims that are available in the public

domain. The problem lies in the fact that until the expanded damages claims were made known, I was not searching the public domain documents (or even the documents Oracle had provided) for areas in which there was no damage claim.
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E.

Oracle's Document Production. 14. Plaintiffs state on page 21 of the Opposition that defendants "do not, and cannot,

dispute that Oracle has produced complete customer contractual histories for PeopleSoft and JDE products and, where possible, summary reports for every customer Defendants deem relevant on their ever-changing customer list." However, Oracle produced incomplete customer contractual histories in both electronic and hard copy forms for PeopleSoft and JDE products. In spite of our best efforts to obtain the missing information, the customer information we have is still incomplete. In addition, the "summary reports" are missing information. For example, Plaintiffs produced "summary reports" that do not contain any of the products supported by TomorrowNow for numerous customers. 15. Plaintiffs state on pages 21 and 22 of the Opposition that "Oracle has and will

continue to produce" seven categories of "responsive financial information." However, these categories are either not relevant or not sufficient to calculate lost license sales associated with the customers Plaintiffs allegedly lost to TomorrowNow. I discuss each category in turn: 16. "The summary customer reports that Oracle ran on the list of (now 83)

customers Defendants claim are relevant": Plaintiffs do not provide any bates number reference associated with the "summary customer reports." I assume Plaintiffs are referring to the customer-specific reports referred to as Analytics Contracts Reports, OKI3 Reports, and Analytics License Reports, none of which are sufficient to calculate lost license sales for the customers at issue in this case. While these reports contain historical information on the specific customers at issue, the historical buying pattern for these customers does not necessarily indicate their future licensing potential. 17. "Evidence on customer up-sell and cross-sell expectations and the bases for

them, including for the customers it was acquiring from PeopleSoft...For instance, Oracle has produced documentation of how it valued the PeopleSoft acquisition, including operating models, planning models, margin summaries and value estimations containing just such expectations and their underlying assumptions": Customer up-sell and cross-sell expectations for the acquired PeopleSoft customer base as a whole would be misleading for purposes of
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analyzing the customer base that allegedly cancelled maintenance at Oracle and went to TomorrowNow. The customers that went to TomorrowNow did so for a variety of reasons, including the fact that they were generally on old releases, did not want to upgrade, had made the decision to migrate to another software vendor, may have experienced financial distress such as bankruptcy and/or severe budgetary restrictions and multiple other reasons. Accordingly, the purchase planning for the PeopleSoft acquisition is misleading to a determination of what the customers at issue might have bought or licensed had they remained at Oracle. Relevant data in support of up-sell and cross-sell possibilities applicable to the customers at issue would be information on license sales to customers that did not leave Oracle and which were on similar releases of the products at issue, by geographic region, by company size, by release level and by any other characteristic upon which license sales vary. 18. "Financial reports showing how the purchasing history of the acquired

PeopleSoft customer base compares to that of customers acquired in other Oracle acquisitions": The purchasing history of the acquired PeopleSoft customer base compared to that of other Oracle acquisitions again relates to customer bases as a whole and is not applicable to the specific subset of Oracle customers, i.e. those that went to TomorrowNow. 19. "Years and years' worth of quarterly and other regular financial reports

showing Oracle's actual revenues for new licenses, software license updates and product support, advanced product support, on demand, education, and consulting (i.e., not just JDE or PS support revenues) as well as detailed board packages, subsidiary performance measure reports, product revenue reporting packages, executive briefing documents and budgets with financial results and projections on all products and on both support and license sales. See id. at ¶¶24-27 ": The House Declaration, paragraphs 24 to 27, reference volumes of publicly-filed SEC documents such as Forms 10-Q and Forms 10-K and internal quarterly reports. These reports are high-level and contain little PeopleSoft or JD Edwards information and little detailed company level financial data except at the consolidated level. The only documents specifically related to the customers at issue are the customer-specific reports referred to as Analytics Contracts Reports, OKI3 Reports, Analytics License Reports, "License sales information," and
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"License fees and pricing calculations," which are not necessarily sufficient to calculate lost license sales for the reasons stated above. 20. "Pricing lists, pricing policies, and pricing calculators for Oracle and PeopleSoft

­ none of which were restricted to only support or (sic) just JDE or PeopleSoft products. Id. at ¶27": The House Declaration, paragraph 27, references "License fees and pricing calculations (see, e.g., ORCL00176128-180465)." These documents contain pricing and renewal information for the customers who went to TomorrowNow. For all the reasons stated above, such documents are insufficient to calculate damages relating to lost licenses sales because the departing companies' prior history is not necessarily an indication of what they would have bought or licensed in the future had they remained at Oracle. 21. "Product profitability analyses which include revenue trends, development costs

and margin summaries for all Oracle products. Id. at ¶¶24, 26-27": The House Declaration, paragraph 27, references "Product profitability analyses, which include license revenue trends, product profitability analyses, development costs, and margin summaries (see, e.g., ORCL00312744-45, ORCL00312820-21, ORCL00313254)." The fact is that the stated documents are only a starting point for analyzing product-level profitability. The documents Plaintiffs reference contain profitability information through the third quarter of 2004. Plaintiffs did not reference any documents after the acquisition in 2005 so there is no indication of whether the profitability remained the same after the Oracle's acquisition of PeopleSoft. The documents Plaintiffs reference are incomplete. At a minimum, I would like to see the information for the entire time period for which Oracle claims damages. F. Lifetime Support and Applications Unlimited. 22. As discussed in my prior declaration, I understand Plaintiffs are expanding their

damages claims to include damages arising out of "...the early adoption and allegedly generous terms of Oracle's Lifetime Support and Applications Unlimited programs and Oracle's alleged additional investment of customer support enhancements." The House Declaration states that Oracle has produced: "A presentation containing detailed analyses of the support policies and release schedules of Oracle products including not only PeopleSoft and Siebel products but also
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